2024-04-13 04:08:55
Galeria has gone bankrupt for the third time. In order for the department store chain to finally produce success stories again, significant changes must be made, say experts.
All good things come in threes: That’s what the investors in the ailing department store chain Galeria Karstadt Kaufhof also seem to think. After all, the company is currently going through its third insolvency proceedings since 2020. Nevertheless, the American Richard Baker and the German Bernd Beetz have reached an agreement with the insolvency administrator Stefan Denkhaus.
“We are happy that our plan has been unanimously accepted and supported. We believe in the future of Galeria and have only one focus: the department store,” said Beetz when it was announced on Wednesday.
But the investor conglomerate should not rely on the power of the saying alone. There are a number of unresolved problems and after bankruptcies in the past, industry experts are skeptical.
Weak locations
On the one hand, there are the many locations, each with large properties. Galeria still operates 92 branches with 12,800 employees. The new owners of the insolvent department store chain Galeria Karstadt Kaufhof probably want to continue operating more than 70 of the 92 branches. Which branches will be closed and which will be retained will be announced at the end of April. The 92 locations are already a significantly reduced number of the 172 department stores that still existed until 2020.
You can’t afford to have a boat that “has a big leak, sinks and takes the whole fleet away,” said Beetz. This refers to unprofitable locations and inefficient business structures.
Some experts believe that the number of branches will decrease significantly in the coming years. “I think 20 branches is a realistic number. Anything beyond that is a concession to the insolvency administrator so that you can get the contract and continue to operate the stores for a certain period of time,” said Jörg Funder, professor of corporate management in retail at the Worms University. The trading consultancy BBE writes that 50 to 60 houses are currently considered profitable.
The German Association of Cities is nevertheless optimistic that a new start can be successful. “Many cities with Galeria locations will breathe a sigh of relief today,” said Managing Director Helmut Dedy on Wednesday. What is important for the cities is that the remaining locations are given a future perspective on which they can build. “This applies especially to the many employees in the Galeria branches. They have repeatedly had to worry about their jobs for months.”
However, the Dortmund works council does not believe that job insecurity has yet been overcome. Because it is not yet clear which locations will be retained, says Christian Kalots: “After the experiences of the last two bankruptcies, you ask yourself: What will happen to each individual? So am I affected or not, or is my location affected?” says Kalots . “These are questions that are there. That’s why the joy is reserved.”
High rent
There is also a special problem with the properties themselves: they do not belong to the company, but are rented. Intensive negotiations are now being held with the landlords, says investor Beetz.
Lack of investment
Investors themselves are also raising skepticism among industry observers. After all, Richard Baker, head of the Canadian company HBC, was the owner of Galeria Kaufhof a few years ago and then sold the chain to Benko. There was then a merger with Karstadt and Kaufhof boss Olivier van der Bossche, who had been fired under Baker, was brought back. You can read more about Investor Baker here.